Introduction:

In a significant ruling reinforcing the legal distinction between relinquishment and gift transactions under the Indian Stamp Act, 1899, the Delhi High Court in Ramesh Sharma v. GNCTD (LPA 346/2020) clarified that when co-owners of a property relinquish their share in favour of another co-owner, such a transaction cannot be treated as a gift for the purposes of stamp duty. The division bench comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar delivered the judgment while hearing an appeal filed by Ramesh Sharma, whose five sisters had executed relinquishment deeds in his favour, which were later impounded by the district authorities for alleged deficiency in stamp duty. The authorities had treated these documents as gift deeds, imposing a higher rate of stamp duty applicable to gifts. The core issue before the Court was whether the relinquishment of rights in a jointly owned property by co-owners could legally be considered a gift within the meaning of the Stamp Act. The Court ultimately held that a relinquishment deed executed among co-owners of property is not equivalent to a gift deed, as it only extinguishes the rights of one co-owner while enlarging the share of another without transferring property in the strict sense.

Arguments on behalf of the Appellant:

Senior Advocate Mr. D.N. Goburdhun, appearing for the appellant along with Advocates Mr. Archit Chauhan, Mr. Attin Shankar Rastogi, Mr. Shivkant Arora, Mr. Adil Vasudeva, and Ms. Saloni, argued that the district authorities had erred in law and in fact by treating the relinquishment deeds (RDs) executed by the appellant’s sisters as gift deeds. It was contended that the property in question was originally jointly owned by the appellant’s parents. Upon the death of their father, the appellant inherited a 50% share as per the will executed by him, while the remaining 50% devolved upon the mother. After the mother’s demise, her share passed to all the children—five daughters and one son—the appellant. Subsequently, the five sisters voluntarily executed relinquishment deeds in favour of their brother, thereby surrendering their respective shares. The appellant maintained that these deeds merely operated as a formal recognition of the transfer of ownership within co-owners and did not constitute a gift under Section 122 of the Transfer of Property Act, 1882. The counsel submitted that a “gift” under the Stamp Act necessarily involves a transfer of property from a donor to a donee voluntarily, without consideration, but it presupposes an act of conveyance creating a new title. In contrast, a relinquishment deed does not convey a new title—it merely extinguishes the share of the executants and enlarges the share of the remaining co-owner. Therefore, the transaction falls outside the ambit of a “gift.”

Further, the appellant relied on judicial precedents, particularly the Full Bench decision in Chella Subbanna & Anr. v. Chella Balasubbareddi & Ors. (1945), where it was held that a coparcener’s relinquishment of his interest in family property does not amount to alienation but merely an extinction of his interest in favour of others. The counsel argued that this reasoning equally applies to co-ownership situations, where each owner holds an undivided interest in the property. Hence, relinquishment among co-owners should not attract the stamp duty applicable to gift deeds. It was also submitted that the district authorities committed a jurisdictional error by impounding the relinquishment deeds and demanding differential stamp duty, which was contrary to both the law and established practice. The counsel stressed that the authorities had overlooked the nature of the transaction and its familial context. The relinquishment by sisters in favour of their brother, being a family arrangement, could not be equated with a gift. The impugned action, therefore, was arbitrary, ultra vires the statute, and liable to be set aside.

Arguments on behalf of the Respondents:

Counsel for the Respondents, Mr. Abhinav Sharma, defended the impugned orders of the district authorities, arguing that the relinquishment deeds executed by the sisters in favour of their brother were, in substance, transfers without consideration, thereby squarely falling within the definition of “gift” under the Indian Stamp Act. The respondent contended that the nomenclature of a document cannot determine its legal character; rather, its contents and the nature of the transaction must be examined. Since the relinquishment deeds resulted in the transfer of the sisters’ interests in the property to their brother, it amounted to a conveyance of rights without consideration. Therefore, it was argued, such transactions must be treated as gifts for the purposes of stamp duty assessment. The respondent further asserted that the relinquishment deeds were not executed as part of any formal family settlement but as independent documents transferring rights. Consequently, they could not be exempted from the higher stamp duty applicable to gifts. The authorities had thus rightly impounded the deeds and demanded additional duty to protect state revenue.

The respondents also argued that the concept of relinquishment primarily applies to joint Hindu family properties or coparcenary interests, not to properties owned jointly under co-ownership without a coparcenary framework. Since the property in question was not part of a Hindu Undivided Family (HUF) but a property jointly inherited by siblings, the legal principle applicable to relinquishment among coparceners could not be extended to co-owners. Therefore, the argument that relinquishment does not amount to alienation was inapplicable. The authorities had lawfully exercised their power under the Indian Stamp Act to ensure proper classification of the document and collection of the correct duty. The respondent also emphasized that fiscal statutes, including the Stamp Act, must be construed strictly, and the onus lies on the party claiming exemption or lower duty to establish its applicability conclusively. Hence, the appellant’s claim was unfounded.

Court’s Judgment and Reasoning:

After a detailed consideration of the arguments and a close examination of the relevant legal principles, the Delhi High Court concluded that the district authorities had indeed erred in treating the relinquishment deeds as gift deeds for the purpose of the Indian Stamp Act. The Court observed that a relinquishment deed executed between co-owners of a property does not create any new title in favour of the recipient; it merely extinguishes the share of the executant, thereby enlarging the share of the other co-owner. The bench emphasized that such transactions do not amount to a “transfer” in the traditional sense under property law, as the transferee already holds a subsisting interest in the property. The relinquishment merely adds to that existing interest and hence cannot be equated with a gift.

Justice Kshetarpal, speaking for the bench, clarified that the essential characteristic of a gift under Section 122 of the Transfer of Property Act is the voluntary transfer of property from one person to another without consideration. However, for such a transfer to occur, the donor must have a distinct ownership that is conveyed to a donee who previously had no interest in the property. In contrast, when co-owners are involved, both parties already hold rights in the same property. A relinquishment by one co-owner in favour of another does not create a new ownership but rather results in the extinction of one’s share and enlargement of the other’s. Thus, it falls outside the scope of a “gift.”

The Court drew strength from the Full Bench ruling in Chella Subbanna (1945), reaffirming that relinquishment by one coparcener in favour of another is not alienation but extinction of rights. Extending this principle to co-ownership, the Court held that a relinquishment among co-owners carries the same legal effect—it merely extinguishes one’s rights without effecting a transfer to a stranger. The Court observed, “Relinquishment does not tantamount to an alienation of rights, and a relinquishment deed between co-owners holds equal force as a deed between coparceners.” Accordingly, it held that the district authorities committed an error in impounding the deeds and demanding higher stamp duty applicable to gifts.

The Court also highlighted the familial context of the transaction. The relinquishment occurred among siblings, and the Court noted that such intra-family transactions often arise from mutual understanding and trust, where economic consideration is typically absent. It observed that “the chances of economic consideration between siblings are remote,” reinforcing the view that the transaction was not commercial in nature but familial. In this light, the Court ruled that the relinquishment deeds merely “added a title to the already existing title” of the appellant.

Finally, the bench directed the district authorities to release the impounded documents immediately, holding that the classification of the deeds as gifts was legally unsustainable. The ruling not only resolved the appellant’s grievance but also provided important judicial clarity for similar cases involving co-ownership properties and stamp duty interpretation.